JANUARY 2018

Editorial DECember 2017 Cartoon by Jym Andalis

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Trump could not have put his casinos through so many bankruptcies without creditor support. In order to gain that support, he made extravagant and unsubstantiated promises about the wealth and jobs the reorganized casinos would create. None of those promises came true.

The same can be said about the GOP tax bill. Unhappy with the widespread criticism of this legislation from economists and policy groups across the political spectrum, the Treasury took another page from Trump’s bankruptcy past — false promises. It issued a one-page, 395-word “analysis” concluding that the tax bill will result in increased tax revenues of $1.8 trillion over the next 10 years, thus paying for itself.

﻿“There is no historical evidence that any tax cut in history comes anywhere near paying for itself,” said Bruce Bartlett, an economic adviser to former president Reagan who helped craft the last major tax reform legislation in 1986.

More troubling, the analysis assumes a 2.9% growth rate in order to conclude that the tax bill will pay for itself. One might wonder how the Treasury arrived at this crucial number. The growth rate is based on the Trump administration’s fiscal 2018 budget, which was published last May, long before serious work on the GOP tax bill had begun. In addition, it takes into account certain regulatory, infrastructure, and welfare reforms that the administration hopes to pass next year.

Rushed effort

Put simply, the Trump administration’s analysis is not based on fact — neither infrastructure, nor welfare reform has actually happened, and they may never happen. Like Trump’s bankruptcy plans, when his administration doesn’t like the numbers, it simply changes them.

Congressional Republicans tout the jobs that a reduced corporate income tax rate will create. But in an economy that is already strong, senior executives are more likely to use this tax benefit to increase executive pay and invest in new technologies that might actually cut jobs in the long run.

This, too, recalls Trump’s bankruptcies. While his casinos performed worse, on average, than their Atlantic City competitors — losing 40% more jobs and a third more revenue between 1997 and 2010 — Trump did exceedingly well for himself, boasting to the New York Times that “the money I took out of [Atlantic City] was incredible.”

Congressional Republicans would deny that they are modeling their tax legislation on Trump’s business failures. Yet, the resemblance to his mismanagement of the casinos — his only other real experience with large, public organizations — is unavoidable: run up huge debts based on implausible promises in order to benefit the few at the expense of the many.

If Trump’s bankruptcy past is prologue, Republicans will eventually try to distance themselves from the future pain caused by their rushed effort at tax reform.